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Syria's war creates concern for its neighbor

As thousands of Syrian refugees continue to stream across the Jordanian border into Zaatari refugee camp, the Hashemite Kingdom has suddenly been forced to deal with the spillover of its neighbor’s civil war.

The more than 40,000 refugees might be tucked into a barbed-wired corner of the high desert, but their arrival - and their country's turmoil - is being felt all the way to Amman.

The effects on Jordan's economy and on its royal family's always-precarious grip on power could be serious, especially now, as protests unfurl in a country outraged by the government's decision to chop fuel subsidies - a necessary action for it to secure $2 billion (1.5 billion euros) in loans from the International Monetary Fund.

"Even before Syria's revolution, Jordan was facing some serious headwind - a political challenge to the monarchy, an economic strain on resources and a strain of the social fabric," says Lara Setrakian, a Middle East analyst and founder of the news startup SyriaDeeply.org. "The ripple effects of Syria's conflict have made all of those problems worse."

The day before the cut, petrol stations in Jordan were crowded with drivers trying to fill up on the still-cheaper gas.

"The cut has meant an overnight increase in fuel prices for a 6.5 million population whose per capita income is only around $6,000," the Eurasia Group said in a November note.

Jordan "can't handle what is a socio-economic crisis," says Dr. Assaf David of the Truman Institute and political science department of the Hebrew University in Jerusalem, who consults on Jordanian affairs. "The trans-Jordanian and Palestinian opposition are united in this."

For the last decade, the Jordanian economy has held steady partly because of wealthy Iraqi refugees who brought money to the country. "They supported the economy and foreign investment; it was an impressive growth," David says. With the Arab Spring came interruptions in fuel supply, notably from Egypt, which meant Jordan didn't have the energy it needed.

Several months ago, the King decided to abolish the subsidies on basic goods, notably oil. "At the last moment he cancelled the decision because he was warned it might lead to upheaval," David says.

"Now he's compelled to make this decision again because of the IMF and World Bank, although he's been warned again that it might lead to intifada in Jordan. If you don't make the decision what does it mean for your ability to rule and govern Jordan and make hard decisions?" David asks. "What does it mean if and when you have to make a harder [governing] decision on Israel, on the West Bank, if he's threatened like this and cancels the decision? The King is basically on his own."

The Syrian refugees are placing a huge burden on the Jordanian economy

"There are concerns that the calm can't last forever, and unemployment is still rising," says Dr. Christopher Phillips, a Jordan expert at the University of London and formerly with the Economist Intelligence Unit. "They're able to keep their federal budget rising but not able to create jobs. And there [is] an army of unemployed who could join the opposition."

So why aren't more people concerned?

This is, after all, a country where both unemployment and frustration with King Abdullah's lukewarm attempts at reform have grown since last year.

Back then, the Egyptian revolution inspired an ultimately unsuccessful Jordanian copycat; in mid-November, and largely unnoticed by the international media, thousands protested against the King and the cuts in subsidies on the streets of Amman.

Though Jordan has seen frequent, smaller protests, these were cause for concern.

"High estimates suggest that around 2,000 people demonstrated in Amman and while the size of the protests remains relatively small, their intensity has increased as open criticism of the King has been gradually intensifying in recent months," Eurasia Group said. "Events… have quickly spiraled out of control."

And unlike 2011's protests, which were staged in Muslim Brotherhood strongholds, the latest "took place in central parts of Amman and other provincial towns that have historically been the King's strongholds," according to the Eurasia Group.

Shockwaves sent rolling by Syrian unrest will further complicate Jordan's economic balancing act.

Jordan needs foreign investment to help its economy deal with the financial costs

"Ever since the Arab Spring happened, any idea that Jordan could survive without foreign grants - as it had hoped - went out the window," Phillips says.

"Pre-Arab Spring, there was an attempt to wean off foreign grants and get the economy rolling, and that went out the window. Now there's a desire by the Saudis and the US to keep Jordan [afloat], meaning they'll always bail them out economically."

Balancing with foreign grants, mostly from the Gulf, he said, "has helped balance the losses of cut trade from Syria."

Besides subsidy cuts and Syria's ongoing civil war, the refugees themselves are packing an economic punch on Jordanians in border cities like Irbid, where the influx has caused rents to climb.

"Given they've received large numbers of refugees, they've been quite controlled and sensible with their policy," Phillips says of the Jordanian government. "They put them in camps and did not let them into Amman."

On the plus side, he says the wealthier Syrians have moved to Amman and "injected some money into the economy," while "the others stayed on border and haven't flooded Jordan the way the Iraqi refugees did" 10 years ago.

David counters that, noting that the influx is a "burden on the infrastructure in Jordan… it's a huge number and they can't support it. They had between half a million and 750,000 coming from Iraq, and 400,000 stayed. The situation of the economy [in Jordan today] is so bad that they can't support them. If you're looking at a growing number of refugees, it's a hell of a problem."

Questions remain, especially as regards the opposition Free Syrian Army (FSA) and potential of its spillover into Jordan.

"Unlike Turkey, they haven't let the FSA operate from Jordan, and that's quite sensible and has kept violence out of Jordan for the moment," Phillips says. "The question is whether that can be sustained in the long term - as the FSA gets stronger will they spill over from Lebanon and use Jordan as a base? And would the Gulf states allow Jordan to allow the FSA to have a base?"

"The question there is whether or not the Jordanian government can resist Saudi and other Gulf states, and how insistent the Saudis and the states are."